South Korea exports fall for 8th month but pace eases for chip, China shipments
10:04 pm Wednesday, May 31st, 2023
By Jihoon Lee
SEOUL (Reuters) -South Korea’s exports fell for an eighth straight month in May in annual terms, but the pace was slower than expected with signs that the worst had passed for chip and China-bound shipments.
Overseas sales by Asia’s fourth-largest economy fell 15.2% year-on-year to $52.24 billion in May, trade ministry data showed on Thursday, compared with a drop of 14.3% in April and a 16.8% decline tipped in a Reuters survey.
The down streak is the longest run of year-on-year decline since January 2020 and has been mostly caused by weak demand for semiconductors, for which the main customer is China.
Despite one less working day in May, the total value of exported goods was higher than the previous month’s $49.58 billion. Compared with a year earlier, there were 1.5 less working days, setting unfavourable base effects.
“We believe South Korea’s exports have already hit the bottom in the second quarter and will swing to growth from the third quarter, albeit not dramatically with the Chinese economy recovering more slowly than previously thought,” said economist Chun Kyu-yeon at Hana Securities.
Still, China’s factory activity unexpectedly swung to growth in May, driven by improved production and demand, a survey showed.
By destination, shipments to China slid 20.8%. It was the 12th straight annual loss, but the pace eased to the slowest in seven months. Those to the United States and European Union declined 1.5% and 3.0%, respectively.
Exports of semiconductors, South Korea’s biggest selling item, dropped 36.2%, extending losses to a 10th consecutive month, though it improved from April’s 41.0% drop. Shipments of petroleum products fell 33.2%, while cars jumped 49.4%.
Trade Minister Lee Chang-Yang said after the data release the country’s trade balance is likely to improve significantly in June.
In May, imports fell 14.0% to $54.34 billion, faster than the 13.3% fall seen in April and the fastest since August 2020, but it was milder than a 14.5% decline forecast in the survey.
That brought the country’s monthly trade balance to a deficit of $2.10 billion in May. It was the 15th month in a row that the export-reliant economy suffered a trade deficit but the smallest amount since May 2022.
Separate data showed on Thursday South Korean manufacturers reported in May the smallest fall in new export orders in their 15-month of decline, suggesting a possible recovery in overseas demand going forward.
(Reporting by Jihoon Lee; Editing by Himani Sarkar and Christopher Cushing)
